Second Quarter 2024 Earnings Teleconference August 1, 2024 CONTENTS Q2 2024 Summary 2024 Guidance Q2 2024 Supplemental Information Appendix 2 Disclosure Regarding Forward-Looking Statements Information provided in this presentation that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regardin ...

Cummins Inc. (CMI) reported second-quarter 2024 earnings of $5.26 per share, which increased from $5.18 per share recorded in the corresponding quarter of 2023. The bottom line also surpassed the Zacks Consensus Estimate of $4.85 per share. The outperformance was driven by higher-than-expected revenues from the Engine, Power Systems and Distribution segments. Cummins' revenues totaled $8.8 billion, compared with $8.64 billion recorded in the year-ago quarter. The top line beat the Zacks Consensus Estimate o ...

Cummins Inc. (NYSE:CMI) Q2 2024 Earnings Conference Call August 1, 2024 10:00 AM ET Company Participants Chris Clulow - Vice President, Investor Relations Jennifer Rumsey - Chair & Chief Executive Officer Mark Smith - Chief Financial Officer Conference Call Participants Steven Fisher - UBS Jamie Cook - Truist Securities Steve Volkmann - Jefferies Jerry Revich - Goldman Sachs Angel Castillo - Morgan Stanley David Raso - Evercore ISI Tami Zakaria - JPMorgan Tim Thein - Raymond James Noah Kaye - Oppenheimer Je ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides essential identification details for Cummins Inc.'s Form 10-Q filing, including registrant information and filing status [Registrant Information](index=1&type=section&id=Registrant%20Information) This section details Cummins Inc.'s identification, incorporation, executive offices, stock listing, and filing status for the June 30, 2024, Form 10-Q - Cummins Inc. is filing its Form 10-Q for the quarter ended June 30, 2024, as a **large accelerated filer**[2](index=2&type=chunk) **Securities Registered Pursuant to Section 12(b) of the Act:** | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common stock, $2.50 par value | CMI | New York Stock Exchange | - As of June 30, 2024, there were **137,047,646 shares of common stock outstanding** with a par value of $2.50 per share[2](index=2&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents Cummins Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period [ITEM 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides Cummins Inc.'s unaudited condensed consolidated financial statements, including net income, comprehensive income, balance sheets, cash flows, equity changes, and detailed explanatory notes [Condensed Consolidated Statements of Net Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Net%20Income) Net sales and net income attributable to Cummins Inc. increased for the three months, with a significant six-month net income surge due to the Atmus divestiture gain **Condensed Consolidated Statements of Net Income (Unaudited, In millions, except per share amounts):** | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET SALES | $8,796 | $8,638 | $17,199 | $17,091 | | Cost of sales | $6,603 | $6,490 | $12,965 | $12,914 | | GROSS MARGIN | $2,193 | $2,148 | $4,234 | $4,177 | | OPERATING INCOME | $1,045 | $997 | $1,968 | $2,023 | | INCOME BEFORE INCOME TAXES | $977 | $949 | $3,198 | $1,978 | | CONSOLIDATED NET INCOME | $752 | $737 | $2,780 | $1,543 | | NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $726 | $720 | $2,719 | $1,510 | | Basic EPS | $5.30 | $5.08 | $19.53 | $10.66 | | Diluted EPS | $5.26 | $5.05 | $19.42 | $10.60 | - For the three months ended June 30, 2024, Net Sales increased by **$158 million (2% YoY)** and Net Income Attributable to Cummins Inc. increased by **$6 million (1% YoY)**[5](index=5&type=chunk) - For the six months ended June 30, 2024, Net Sales increased by **$108 million (1% YoY)** and Net Income Attributable to Cummins Inc. significantly increased by **$1,209 million (80% YoY)**, largely due to the gain on the Atmus divestiture[5](index=5&type=chunk)[92](index=92&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income attributable to Cummins Inc. increased for both the three and six months ended June 30, 2024, primarily due to higher consolidated net income, despite foreign currency translation adjustments contributing to other comprehensive loss **Condensed Consolidated Statements of Comprehensive Income (Unaudited, In millions):** | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | CONSOLIDATED NET INCOME | $752 | $737 | $2,780 | $1,543 | | Other comprehensive (loss) income, net of tax | $(73) | $(96) | $(134) | $(26) | | COMPREHENSIVE INCOME | $679 | $641 | $2,646 | $1,517 | | Less: Comprehensive income attributable to noncontrolling interests | $24 | $15 | $56 | $34 | | COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $655 | $626 | $2,590 | $1,483 | - Comprehensive income attributable to Cummins Inc. increased by **$29 million (4.6% YoY)** for the three months and **$1,107 million (74.6% YoY)** for the six months ended June 30, 2024[7](index=7&type=chunk) - Foreign currency translation adjustments resulted in a loss of **$(83) million** for the three months and **$(143) million** for the six months ended June 30, 2024[7](index=7&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets show a decrease in total assets and total liabilities from December 31, 2023, to June 30, 2024, while total equity increased, reflecting the impact of the Atmus divestiture and changes in debt structure **Condensed Consolidated Balance Sheets (Unaudited, In millions, except par value):** | Asset/Liability/Equity | June 30, 2024 | December 31, 2023 | | :------------------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $1,590 | $2,179 | | Total current assets | $14,962 | $15,198 | | Total assets | $31,320 | $32,005 | | Total current liabilities | $11,144 | $12,903 | | Total liabilities | $20,744 | $22,101 | | Total equity | $10,576 | $9,904 | - Total assets decreased by **$685 million (2.1% decline)** from December 31, 2023, to June 30, 2024[9](index=9&type=chunk) - Total liabilities decreased by **$1,357 million (6.1% decline)**, while total equity increased by **$672 million (6.8% increase)** over the same period[9](index=9&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2024, Cummins experienced a net cash outflow from operating activities, a higher cash outflow from investing activities, and a significant increase in cash provided by financing activities compared to the prior year, resulting in a larger net decrease in cash and cash equivalents **Condensed Consolidated Statements of Cash Flows (Unaudited, In millions):** | Cash Flow Activity | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(575) | $978 | | Net cash used in investing activities | $(806) | $(606) | | Net cash provided by (used in) financing activities | $807 | $(603) | | Net decrease in cash and cash equivalents | $(589) | $(299) | - Net cash used in operating activities was **$(575) million** for the six months ended June 30, 2024, a significant decrease from **$978 million** provided in the comparable 2023 period, primarily due to **$1.9 billion** in Settlement Agreement payments[11](index=11&type=chunk)[178](index=178&type=chunk) - Net cash provided by financing activities increased by **$1.41 billion**, driven by higher proceeds from borrowings (**$2.482 billion** vs **$737 million**) and increased net commercial paper borrowings (**$85 million** vs **$(658) million**)[11](index=11&type=chunk)[179](index=179&type=chunk) [Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interests and Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Redeemable%20Noncontrolling%20Interests%20and%20Equity) The statements detail changes in equity components, including retained earnings, treasury stock, and accumulated other comprehensive loss, reflecting net income, dividend payments, share-based awards, and the impact of the Atmus divestiture which reduced treasury stock and noncontrolling interests **Changes in Cummins Inc. Shareholders' Equity (Unaudited, In millions):** | Equity Component | Balance at Dec 31, 2023 | Six months ended June 30, 2024 (Changes) | Balance at June 30, 2024 | | :------------------------------------------ | :---------------------- | :--------------------------------------- | :----------------------- | | Common Stock | $556 | $0 | $556 | | Additional Capital Paid-in | $2,008 | $18 | $2,026 | | Retained Earnings | $17,851 | $2,252 | $20,101 | | Treasury Stock | $(9,359) | $(1,438) | $(10,797) | | Accumulated Other Comprehensive Loss | $(2,206) | $(129) | $(2,335) | | Total Cummins Inc. Shareholders' Equity | $8,850 | $701 | $9,551 | | Noncontrolling Interests | $1,054 | $(29) | $1,025 | | Total Equity | $9,904 | $672 | $10,576 | - Net income attributable to Cummins Inc. for the six months ended June 30, 2024, was **$2,719 million**, contributing to retained earnings[15](index=15&type=chunk) - The divestiture of Atmus resulted in a reduction of treasury stock by **$1,532 million** and a decrease in noncontrolling interests by **$19 million**[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering significant accounting policies, business operations, recent events like the Atmus divestiture and environmental settlement, and specific financial line items [NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) This note describes Cummins Inc. as a global power solutions leader with five business segments, detailing its product range and global service network. It highlights the completion of the Atmus divestiture in March 2024 and the $1.9 billion payment made in Q2 2024 related to the U.S. emissions Settlement Agreements - Cummins Inc. is a global power solutions leader with five business segments: **Components, Engine, Distribution, Power Systems, and Accelera**[17](index=17&type=chunk) - On March 18, 2024, Cummins completed the divestiture of its remaining **80.5% ownership of Atmus Filtration Technologies Inc.** through a tax-free split-off[18](index=18&type=chunk) - In the second quarter of 2024, Cummins made **$1.9 billion** in payments required by the Settlement Agreements with U.S. environmental agencies regarding emissions certification and compliance[19](index=19&type=chunk) [NOTE 2. REVENUE FROM CONTRACTS WITH CUSTOMERS](index=11&type=section&id=NOTE%202.%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) This note details Cummins' revenue recognition from customer contracts, including long-term arrangements and disaggregated sales by geographic area and segment. It also notes a realignment of certain businesses within the Components segment for reporting consistency - Aggregate transaction price for long-term contracts (excluding extended warranty) was **$2.9 billion** as of June 30, 2024, with **$1.5 billion** expected to be recognized in the next 12 months[31](index=31&type=chunk) **Consolidated Net Sales by Geographic Area (In millions):** | Geographic Area | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $5,119 | $4,937 | $9,904 | $9,739 | | China | $747 | $762 | $1,470 | $1,552 | | India | $425 | $413 | $869 | $824 | | Other international | $2,505 | $2,526 | $4,956 | $4,976 | | Total net sales | $8,796 | $8,638 | $17,199 | $17,091 | - The Components segment realigned certain businesses, combining engine components and software/electronics into a new 'components and software' business and rebranding 'axles and brakes' as 'drivetrain and braking systems,' effective April 1, 2024, with no impact on consolidated results[34](index=34&type=chunk) [NOTE 3. PENSIONS AND OTHER POSTRETIREMENT BENEFITS](index=13&type=section&id=NOTE%203.%20PENSIONS%20AND%20OTHER%20POSTRETIREMENT%20BENEFITS) Cummins sponsors defined benefit pension and OPEB plans, with contributions made and expected for 2024. The net periodic benefit expense for U.S. pension plans increased for both the three and six months ended June 30, 2024, compared to 2023 **Pension and OPEB Contributions (In millions):** | Contribution Type | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Defined benefit pension contributions | $8 | $6 | $47 | $94 | | OPEB payments, net | $3 | $5 | $12 | $9 | | Defined contribution pension plans | $26 | $30 | $74 | $73 | - Cummins anticipates making additional defined benefit pension contributions of **$22 million** during the remainder of 2024 for U.S. and U.K. plans, with the 2024 annual net periodic pension cost expected to approximate **$34 million**[40](index=40&type=chunk) **Net Periodic Pension and OPEB Expense (Income) for U.S. Pension Plans (In millions):** | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net periodic benefit expense (income) | $9 | $5 | $17 | $9 | [NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES](index=14&type=section&id=NOTE%204.%20EQUITY,%20ROYALTY%20AND%20INTEREST%20INCOME%20FROM%20INVESTEES) Equity, royalty, and interest income from investees decreased for both the three and six months ended June 30, 2024, compared to the prior year, primarily due to lower royalty and interest income and losses at NPROXX, partially offset by higher earnings from Chongqing Cummins Engine Company, Ltd **Equity, Royalty and Interest Income from Investees (In millions):** | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cummins share of net income | $80 | $96 | $180 | $184 | | Royalty and interest income | $23 | $37 | $46 | $68 | | Total Equity, royalty and interest income from investees | $103 | $133 | $226 | $252 | - Total equity, royalty, and interest income from investees decreased by **$30 million (22.6% YoY)** for the three months and **$26 million (10.3% YoY)** for the six months ended June 30, 2024[43](index=43&type=chunk) - Accelera business formed a joint venture, Amplify Cell Technologies LLC, with Daimler Truck, PACCAR, and EVE Energy to localize battery cell production in the U.S. Cummins' maximum required contribution is **$830 million**, with approximately **$50 million** contributed as of June 30, 2024[43](index=43&type=chunk) [NOTE 5. INCOME TAXES](index=14&type=section&id=NOTE%205.%20INCOME%20TAXES) Cummins' effective tax rate for the six months ended June 30, 2024, was significantly lower than the prior year, primarily due to a $1.3 billion non-taxable gain from the Atmus split-off. The three-month rate also saw favorable discrete tax items **Effective Tax Rates:** | Period | 2024 | 2023 | | :-------------------- | :----- | :----- | | Three months ended June 30 | 23.0% | 22.3% | | Six months ended June 30 | 13.1% | 22.0% | - The six months ended June 30, 2024, included favorable discrete tax items primarily due to the **$1.3 billion non-taxable gain** on the Atmus split-off[44](index=44&type=chunk) - The three months ended June 30, 2024, contained favorable discrete tax items of **$9 million**, mainly from share-based compensation tax benefits[44](index=44&type=chunk) [NOTE 6. MARKETABLE SECURITIES](index=15&type=section&id=NOTE%206.%20MARKETABLE%20SECURITIES) Marketable securities, classified as current assets, primarily consist of debt mutual funds and certificates of deposit. The total estimated fair value of marketable securities increased slightly from December 31, 2023, to June 30, 2024 **Marketable Securities (In millions):** | Type | June 30, 2024 (Estimated fair value) | December 31, 2023 (Estimated fair value) | | :-------------------------- | :----------------------------------- | :----------------------------------- | | Publicly-traded shares | $4 | $0 | | Debt mutual funds | $295 | $272 | | Certificates of deposit | $257 | $246 | | Equity mutual funds | $24 | $28 | | Debt securities | $13 | $16 | | Total marketable securities | $593 | $562 | - All marketable securities are classified as current assets and valued using **Level 1 or Level 2 inputs**, with no Level 3 securities or transfers between levels[47](index=47&type=chunk)[48](index=48&type=chunk) **Proceeds from Sales and Maturities of Marketable Securities (In millions):** | Activity | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Proceeds from sales of marketable securities | $644 | $509 | | Proceeds from maturities of marketable securities | $41 | $111 | | Investments in marketable securities - liquidations | $685 | $620 | [NOTE 7. INVENTORIES](index=16&type=section&id=NOTE%207.%20INVENTORIES) Inventories, stated at the lower of cost or net realizable value, increased from December 31, 2023, to June 30, 2024, primarily driven by an increase in finished products **Inventories (In millions):** | Category | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :---------------- | | Finished products | $2,979 | $2,770 | | Work-in-process and raw materials | $3,101 | $3,156 | | Inventories at FIFO cost | $6,080 | $5,926 | | Excess of FIFO over LIFO | $(223) | $(249) | | Total Inventories | $5,857 | $5,677 | - Total inventories increased by **$180 million (3.2% increase)** from December 31, 2023, to June 30, 2024, with finished products increasing by **$209 million**[52](index=52&type=chunk) [NOTE 8. SUPPLEMENTAL BALANCE SHEET DATA](index=16&type=section&id=NOTE%208.%20SUPPLEMENTAL%20BALANCE%20SHEET%20DATA) This note provides a breakdown of 'Other assets,' 'Other accrued expenses,' and 'Other liabilities' on the balance sheet. A significant decrease in 'Other accrued expenses' is noted due to the payment of Settlement Agreements **Other Assets (In millions):** | Category | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Deferred income taxes | $1,009 | $1,082 | | Operating lease assets | $454 | $501 | | Corporate owned life insurance | $419 | $417 | | Other | $507 | $543 | | Total Other assets | $2,389 | $2,543 | **Other Accrued Expenses (In millions):** | Category | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :---------------- | | Settlement Agreements | $20 | $1,938 | | Other accrued expenses (Total) | $1,890 | $3,754 | - Other accrued expenses significantly decreased by **$1,864 million**, primarily due to the **$1.9 billion** payment made for the Settlement Agreements in Q2 2024[54](index=54&type=chunk)[19](index=19&type=chunk) [NOTE 9. DEBT](index=17&type=section&id=NOTE%209.%20DEBT) Cummins updated its credit agreements in June 2024, maintaining $4.0 billion in committed credit facilities. The company issued $2.25 billion in senior unsecured notes in February 2024 and repaid $1.1 billion of a term loan, leading to an increase in total long-term debt - On June 3, 2024, Cummins entered into amended and restated five-year and 364-day credit agreements, maintaining **$4.0 billion** in committed credit facilities[56](index=56&type=chunk)[57](index=57&type=chunk) - In February 2024, Cummins issued **$2.25 billion** aggregate principal amount of senior unsecured notes with maturities in 2029, 2034, and 2054, receiving net proceeds of **$2.2 billion**[63](index=63&type=chunk) **Long-term Debt (In millions):** | Debt Type | June 30, 2024 | December 31, 2023 | | :------------------------------------------ | :------------ | :---------------- | | Term loan, due 2025 | $100 | $1,150 | | Senior notes, due 2029 | $500 | $0 | | Senior notes, due 2034 | $750 | $0 | | Senior notes, due 2054 | $1,000 | $0 | | Other debt | $186 | $94 | | Total long-term debt | $5,426 | $4,802 | [NOTE 10. PRODUCT WARRANTY LIABILITY](index=19&type=section&id=NOTE%2010.%20PRODUCT%20WARRANTY%20LIABILITY) Cummins' total product warranty liability increased to $2.603 billion at June 30, 2024, from $2.497 billion at the beginning of the year, driven by provisions for base warranties and product campaigns, partially offset by payments made **Product Warranty Liability Reconciliation (In millions):** | Activity | Six months ended June 30, 2024 | | :------------------------------------------------ | :----------------------------- | | Balance at beginning of year | $2,497 | | Provision for base warranties issued | $331 | | Deferred revenue on extended warranty contracts sold | $180 | | Provision for product campaigns issued | $23 | | Payments made during period | $(360) | | Changes in estimates for pre-existing product warranties and campaigns | $98 | | Balance at end of period | $2,603 | - The provision for base warranties issued as a percent of sales was **1.9%** for both the three and six months ended June 30, 2024, slightly up from **1.8%** in 2023[133](index=133&type=chunk) **Warranty Related Deferred Revenues and Liabilities (In millions):** | Category | June 30, 2024 | December 31, 2023 | | :------------------------------------------ | :------------ | :---------------- | | Deferred revenue related to extended coverage programs (Total) | $1,086 | $1,053 | | Product warranty (Total) | $1,517 | $1,444 | | Total warranty accrual | $2,603 | $2,497 | [NOTE 11. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=NOTE%2011.%20COMMITMENTS%20AND%20CONTINGENCIES) Cummins is involved in various legal proceedings, including product liability, environmental, and regulatory matters. A significant development is the finalization of Settlement Agreements with U.S. environmental agencies in April 2024, which required a $1.9 billion payment in Q2 2024 and carries risks of further penalties and litigation - In April 2024, Settlement Agreements with U.S. environmental agencies became final, resolving civil claims regarding emissions certification for certain pick-up truck engines. Cummins made **$1.9 billion** in payments in Q2 2024[19](index=19&type=chunk)[69](index=69&type=chunk) - The company recorded a **$2.0 billion charge** in Q4 2023 for these Settlement Agreements, in addition to **$59 million** for prior recalls[69](index=69&type=chunk) - Cummins faces potential additional regulatory review from non-U.S. regulators and shareholder/consumer litigation related to these emissions matters[70](index=70&type=chunk)[210](index=210&type=chunk) [NOTE 12. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=22&type=section&id=NOTE%2012.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss (AOCL) for Cummins Inc. increased for both the three and six months ended June 30, 2024, primarily due to foreign currency translation adjustments, partially offset by changes in pension and OPEB plans **Changes in Accumulated Other Comprehensive Loss (AOCL) Attributable to Cummins Inc. (In millions):** | Component | Balance at March 31, 2024 | Net current period other comprehensive income (loss) (3 months) | Balance at June 30, 2024 | | :------------------------------------------ | :------------------------ | :-------------------------------------------------------------- | :----------------------- | | Change in pension and OPEB plans | $(861) | $13 | $(848) | | Foreign currency translation adjustment | $(1,514) | $(81) | $(1,595) | | Unrealized gain (loss) on derivatives | $111 | $(3) | $108 | | Total attributable to Cummins Inc. | $(2,264) | $(71) | $(2,335) | **Changes in Accumulated Other Comprehensive Loss (AOCL) Attributable to Cummins Inc. (In millions):** | Component | Balance at Dec 31, 2023 | Net current period other comprehensive (loss) income (6 months) | Balance at June 30, 2024 | | :------------------------------------------ | :---------------------- | :-------------------------------------------------------------- | :----------------------- | | Change in pension and OPEB plans | $(848) | $0 | $(848) | | Foreign currency translation adjustment | $(1,457) | $(138) | $(1,595) | | Unrealized gain on derivatives | $99 | $9 | $108 | | Total attributable to Cummins Inc. | $(2,206) | $(129) | $(2,335) | - Foreign currency translation adjustments were the primary driver of the other comprehensive loss, with a **$(81) million loss** for the three months and **$(138) million loss** for the six months ended June 30, 2024[77](index=77&type=chunk)[79](index=79&type=chunk) [NOTE 13. DERIVATIVES](index=24&type=section&id=NOTE%2013.%20DERIVATIVES) Cummins uses financial derivative instruments, including foreign currency forward contracts and interest rate swaps, to manage exposure to foreign exchange rates, interest rates, and commodity prices, solely for hedging purposes. The company had $4.4 billion in foreign currency forward contracts and $890 million in net investment hedges at June 30, 2024 - Cummins uses financial derivatives (foreign currency forward contracts, commodity swaps, interest rate swaps) exclusively for **hedging, not speculation**[81](index=81&type=chunk) - As of June 30, 2024, foreign currency forward contracts had notional amounts of **$4.4 billion**, with British pound, Chinese renminbi, Australian dollar, Canadian dollar, and Euro comprising **84%** of outstanding contracts[82](index=82&type=chunk) - The notional amount of foreign exchange forwards designated as net investment hedges was **$890 million** at June 30, 2024[82](index=82&type=chunk) [NOTE 14. ATMUS INITIAL PUBLIC OFFERING (IPO) AND DIVESTITURE](index=26&type=section&id=NOTE%2014.%20ATMUS%20INITIAL%20PUBLIC%20OFFERING%20(IPO)%20AND%20DIVESTITURE) Cummins completed the divestiture of its remaining 80.5% ownership of Atmus Filtration Technologies Inc. on March 18, 2024, through a tax-free split-off. This transaction resulted in a $1.3 billion gain recorded as other income and a reduction of Cummins' common stock outstanding by 5.6 million shares - On March 18, 2024, Cummins completed the divestiture of its remaining **80.5% ownership of Atmus Filtration Technologies Inc.** via a tax-free split-off[92](index=92&type=chunk) - The divestiture involved exchanging **67 million Atmus shares** for **5.6 million Cummins shares**, recorded as treasury stock[92](index=92&type=chunk) - Cummins recognized a gain of approximately **$1.3 billion** related to the Atmus divestiture, recorded as other income in the Condensed Consolidated Statements of Net Income for the six months ended June 30, 2024[92](index=92&type=chunk) [NOTE 15. ACQUISITIONS](index=27&type=section&id=NOTE%2015.%20ACQUISITIONS) In the first six months of 2024, Cummins acquired Engendren Corporation for $65 million, resulting in $33 million in goodwill and $8 million in intangibles. In 2023, the company made equity investments in Hydrogenics Corporation and acquired Teksid Hierro de Mexico, S.A. de C.V **Acquisitions for the six months ended June 30, 2024 (In millions):** | Entity Acquired | Date of Acquisition | Percent Interest Acquired | Purchase Consideration | Goodwill Acquired | Recognized Intangibles | | :-------------------- | :------------------ | :------------------------ | :--------------------- | :---------------- | :--------------------- | | Engendren Corporation | 02/16/24 | 100% | $65 | $33 | $8 | **Acquisitions for the six months ended June 30, 2023 (In millions):** | Entity Acquired | Date of Acquisition | Percent Interest Acquired | Purchase Consideration | Goodwill Acquired | Recognized Intangibles | | :-------------------------- | :------------------ | :------------------------ | :--------------------- | :---------------- | :--------------------- | | Hydrogenics Corporation | 06/29/23 | 19% | $335 | $0 | $0 | | Teksid Hierro de Mexico, S.A. de C.V. | 04/03/23 | 100% | $143 | $18 | $0 | - Intangible assets acquired in the business combination were mostly **customer and trade name related**[95](index=95&type=chunk) [NOTE 16. OPERATING SEGMENTS](index=27&type=section&id=NOTE%2016.%20OPERATING%20SEGMENTS) Cummins operates through five reportable segments: Components, Engine, Distribution, Power Systems, and Accelera. Segment performance is evaluated using EBITDA, which is earnings or losses before interest expense, income taxes, depreciation, amortization, and noncontrolling interests. The Accelera segment is in early stages, focusing on hydrogen production and electrified power systems - Cummins' five reportable operating segments are **Components, Engine, Distribution, Power Systems, and Accelera**[98](index=98&type=chunk) - Segment performance is evaluated using **EBITDA** (earnings or losses before interest expense, income taxes, depreciation and amortization, and noncontrolling interests)[98](index=98&type=chunk) - The Accelera segment is in the early stages of commercializing hydrogen production technologies and electrified power systems, including battery, fuel cell, and electric powertrain technologies[98](index=98&type=chunk) [NOTE 17. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS](index=29&type=section&id=NOTE%2017.%20RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) Cummins plans to adopt new FASB ASUs on Segment Reporting (ASU 2023-07) and Income Tax Disclosures (ASU 2023-09) in fiscal years beginning after December 15, 2023, and December 15, 2024, respectively. Neither is expected to have a material impact on financial statements or disclosures - Cummins plans to adopt ASU 2023-07, 'Segment Reporting,' for fiscal years beginning after December 15, 2023 (i.e., 2024 Form 10-K), with retrospective adoption required[102](index=102&type=chunk) - Cummins will adopt ASU 2023-09, 'Income Taxes,' for annual periods beginning after December 15, 2024 (i.e., 2025 Form 10-K), on a prospective basis[103](index=103&type=chunk) - Neither ASU 2023-07 nor ASU 2023-09 is expected to have a material impact on Cummins' financial statements or disclosures[102](index=102&type=chunk)[103](index=103&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Cummins' financial performance, condition, and future outlook. It covers an executive summary, detailed results of operations by segment, liquidity and capital resources, critical accounting estimates, and recent accounting pronouncements. Key highlights include the impact of the Atmus divestiture and the $1.9 billion payment for environmental Settlement Agreements [CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION](index=30&type=section&id=CAUTIONARY%20STATEMENTS%20REGARDING%20FORWARD-LOOKING%20INFORMATION) This section outlines various risk factors that could cause actual results to differ materially from forward-looking statements. These include risks related to government regulation (e.g., Settlement Agreements, emissions standards), business conditions (e.g., supply chain, acquisitions), products and technology (e.g., recalls, new tech demand), and general factors (e.g., climate change, interest rates, geopolitical risks) - Forward-looking statements are subject to risks including adverse consequences from Settlement Agreements, increased regulatory scrutiny, and evolving environmental legislation[105](index=105&type=chunk)[106](index=106&type=chunk) - Business conditions risks include raw material fluctuations, supply shortages, aligning capacity with demand, and actions of joint ventures[106](index=106&type=chunk) - Product and technology risks involve product recalls, new technology reducing demand for current products, and product liability claims[107](index=107&type=chunk) [ORGANIZATION OF INFORMATION](index=32&type=section&id=ORGANIZATION%20OF%20INFORMATION) This section outlines the structure of the Management's Discussion and Analysis (MD&A), which includes an executive summary, results of operations, operating segment results, outlook, liquidity and capital resources, critical accounting estimates, and recent accounting pronouncements - The MD&A is organized into sections including Executive Summary, Results of Operations, Operating Segment Results, Outlook, Liquidity and Capital Resources, Application of Critical Accounting Estimates, and Recently Issued Accounting Pronouncements[110](index=110&type=chunk) [EXECUTIVE SUMMARY AND FINANCIAL HIGHLIGHTS](index=32&type=section&id=EXECUTIVE%20SUMMARY%20AND%20FINANCIAL%20HIGHLIGHTS) Cummins Inc. is a global power solutions leader with five segments. The company's Q2 2024 net sales increased 2% year-over-year, and year-to-date net income significantly rose by 80%, largely due to the Atmus divestiture gain. Key events include the Atmus split-off, a $1.9 billion payment for environmental Settlement Agreements, and new credit agreements - Cummins is a global power solutions leader operating through five business segments: **Components, Engine, Distribution, Power Systems, and Accelera**[110](index=110&type=chunk) - Net sales for the three months ended June 30, 2024, increased by **2% to $8.8 billion**, while net income attributable to Cummins Inc. increased by **1% to $726 million**[115](index=115&type=chunk) - For the six months ended June 30, 2024, net sales increased by **1% to $17.2 billion**, and net income attributable to Cummins Inc. surged by **80% to $2.7 billion**, primarily driven by the gain on the Atmus divestiture[115](index=115&type=chunk)[120](index=120&type=chunk) - In Q2 2024, Cummins made **$1.9 billion** in payments for the U.S. environmental Settlement Agreements[114](index=114&type=chunk) [RESULTS OF OPERATIONS](index=36&type=section&id=RESULTS%20OF%20OPERATIONS) Cummins reported a 2% increase in net sales for Q2 2024 and a 1% increase year-to-date, driven by strong demand in power generation and North American on-highway truck markets, partially offset by the Atmus divestiture. Gross margin improved slightly year-to-date, while operating income saw mixed results. A significant non-taxable gain from the Atmus split-off boosted income before taxes and net income for the six-month period **Consolidated Financial Performance (In millions, except per share amounts):** | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | Six months ended June 30, 2024 | Six months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET SALES | $8,796 | $8,638 | $17,199 | $17,091 | | GROSS MARGIN | $2,193 | $2,148 | $4,234 | $4,177 | | OPERATING INCOME | $1,045 | $997 | $1,968 | $2,023 | | INCOME BEFORE INCOME TAXES | $977 | $949 | $3,198 | $1,978 | | NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $726 | $720 | $2,719 | $1,510 | | Diluted EPS | $5.26 | $5.05 | $19.42 | $10.60 | - Net sales for the three months ended June 30, 2024, increased by **$158 million (2% YoY)**, primarily due to increased power generation demand and higher demand in North American on-highway truck markets, partially offset by the Atmus divestiture[129](index=129&type=chunk) - Gross margin increased by **$57 million (1% YoY)** for the six months ended June 30, 2024, and as a percentage of sales, it increased by **0.2 percentage points to 24.6%**, driven by favorable pricing and lower material costs[132](index=132&type=chunk) - Other income, net, for the six months ended June 30, 2024, included a **$1.333 billion gain** related to the divestiture of Atmus[141](index=141&type=chunk) [OPERATING SEGMENT RESULTS](index=40&type=section&id=OPERATING%20SEGMENT%20RESULTS) This section provides a detailed breakdown of sales and EBITDA performance for each of Cummins' five operating segments: Components, Engine, Distribution, Power Systems, and Accelera. The Atmus divestiture significantly impacted the Components segment, while Power Systems and Distribution showed strong growth, particularly in power generation markets - Segment performance is evaluated using **EBITDA** (earnings or losses before interest expense, income taxes, depreciation and amortization, and noncontrolling interests)[148](index=148&type=chunk) **Segment Sales and EBITDA (Three months ended June 30, 2024 vs. 2023, In millions):** | Segment | 2024 Sales | 2023 Sales | Sales Change (%) | 2024 EBITDA | 2023 EBITDA | EBITDA Change (%) | | :-------------------- | :--------- | :--------- | :--------------- | :---------- | :---------- | :---------------- | | Components | $2,982 | $3,425 | (13)% | $406 | $486 | (16)% | | Engine | $3,151 | $2,988 | 5% | $445 | $425 | 5% | | Distribution | $2,829 | $2,595 | 9% | $314 | $299 | 5% | | Power Systems | $1,589 | $1,457 | 9% | $301 | $201 | 50% | | Accelera | $111 | $85 | 31% | $(117) | $(114) | (3)% | | Total | $8,796 | $8,638 | 2% | $1,345 | $1,304 | 3% | **Segment Sales and EBITDA (Six months ended June 30, 2024 vs. 2023, In millions):** | Segment | 2024 Sales | 2023 Sales | Sales Change (%) | 2024 EBITDA | 2023 EBITDA | EBITDA Change (%) | | :-------------------- | :--------- | :--------- | :--------------- | :---------- | :---------- | :---------------- | | Components | $6,314 | $6,982 | (10)% | $879 | $993 | (11)% | | Engine | $6,079 | $5,974 | 2% | $859 | $882 | (3)% | | Distribution | $5,364 | $5,001 | 7% | $608 | $634 | (4)% | | Power Systems | $2,978 | $2,800 | 6% | $538 | $420 | 28% | | Accelera | $204 | $170 | 20% | $(218) | $(208) | (5)% | | Total | $17,199 | $17,091 | 1% | $3,917 | $2,665 | 47% | [Components Segment Results](index=40&type=section&id=Components%20Segment%20Results) The Components segment experienced a significant decline in sales and EBITDA for both the three and six months ended June 30, 2024, primarily due to the divestiture of Atmus. Emission solutions sales also decreased due to weaker demand in China and North America - Components segment total sales decreased by **$443 million (13% YoY)** for the three months and **$668 million (10% YoY)** for the six months ended June 30, 2024[149](index=149&type=chunk)[152](index=152&type=chunk) - The Atmus divestiture on March 18, 2024, was the primary driver, reducing sales by **$417 million** for the three months and **$481 million** for the six months[152](index=152&type=chunk) - Segment EBITDA decreased by **$80 million (16% YoY)** for the three months and **$114 million (11% YoY)** for the six months, mainly due to the Atmus divestiture[149](index=149&type=chunk)[153](index=153&type=chunk) [Engine Segment Results](index=41&type=section&id=Engine%20Segment%20Results) The Engine segment saw increased sales for the three and six months ended June 30, 2024, driven by stronger demand in North American medium-duty and heavy-duty truck markets and favorable pricing. However, off-highway sales declined due to weaker global construction markets, and six-month EBITDA decreased due to higher expenses and unfavorable mix - Engine segment total sales increased by **$163 million (5% YoY)** for the three months and **$105 million (2% YoY)** for the six months ended June 30, 2024[154](index=154&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Medium-duty truck and bus sales increased by **$132 million (14% YoY)** for the three months, primarily due to higher North American truck demand (shipments up **12%**) and increased pricing[156](index=156&type=chunk) - Off-highway sales decreased by **$52 million (11% YoY)** for the three months and **$146 million (14% YoY)** for the six months, mainly due to lower demand in global construction markets[156](index=156&type=chunk)[157](index=157&type=chunk) - Six-month Engine segment EBITDA decreased by **$23 million (3% YoY)**, primarily due to higher compensation expenses, increased product coverage, and lower equity/royalty income, partially offset by favorable pricing[158](index=158&type=chunk) [Distribution Segment Results](index=42&type=section&id=Distribution%20Segment%20Results) The Distribution segment reported increased sales for both the three and six months ended June 30, 2024, primarily driven by higher demand in power generation markets across North America, Europe, and Asia Pacific. Three-month EBITDA increased due to favorable pricing, but six-month EBITDA decreased due to higher compensation and managed expenses - Distribution segment total sales increased by **$234 million (9% YoY)** for the three months and **$363 million (7% YoY)** for the six months ended June 30, 2024[159](index=159&type=chunk)[162](index=162&type=chunk) - North American sales increased by **$104 million (6% YoY)** for the three months, driven by power generation markets (data center and commercial)[162](index=162&type=chunk) - European sales increased by **$72 million (34% YoY)** for the three months and **$117 million (29% YoY)** for the six months, mainly due to favorable demand in power generation markets[162](index=162&type=chunk) - Six-month Distribution segment EBITDA decreased by **$26 million (4% YoY)**, primarily due to higher compensation expenses, unfavorable mix, and higher managed expenses, partially offset by favorable pricing[164](index=164&type=chunk) [Power Systems Segment Results](index=44&type=section&id=Power%20Systems%20Segment%20Results) The Power Systems segment achieved strong sales and EBITDA growth for both the three and six months ended June 30, 2024, primarily fueled by significantly higher demand in power generation markets, especially for data centers in North America and China. Favorable pricing and improved mix also contributed to the EBITDA increase - Power Systems segment total sales increased by **$132 million (9% YoY)** for the three months and **$178 million (6% YoY)** for the six months ended June 30, 2024[166](index=166&type=chunk)[168](index=168&type=chunk) - Power generation sales increased by **$133 million (16% YoY)** for the three months and **$216 million (13% YoY)** for the six months, driven by higher demand in data center markets in North America and China[168](index=168&type=chunk) - Segment EBITDA increased by **$100 million (50% YoY)** for the three months and **$118 million (28% YoY)** for the six months, mainly due to favorable pricing, improved mix, and higher volumes[166](index=166&type=chunk)[169](index=169&type=chunk) [Accelera Segment Results](index=45&type=section&id=Accelera%20Segment%20Results) The Accelera segment reported increased sales for both the three and six months ended June 30, 2024, primarily due to improved sales of electrolyzers. Despite sales growth, the segment continued to incur EBITDA losses, reflecting its early stage of commercialization and ongoing investment in new technologies - Accelera segment total sales increased by **$26 million (31% YoY)** for the three months and **$34 million (20% YoY)** for the six months ended June 30, 2024[171](index=171&type=chunk) - The sales increase was primarily due to **improved sales of electrolyzers**[171](index=171&type=chunk) - Segment EBITDA remained a loss, increasing slightly to **$(117) million** for the three months and **$(218) million** for the six months, reflecting continued investment in early-stage technologies[171](index=171&type=chunk) [OUTLOOK](index=46&type=section&id=OUTLOOK) Cummins anticipates continued strong demand in North American medium-duty trucks, Indian truck markets, Power Systems (power generation and mining), and aftermarket businesses. Challenges include expected weakening demand for North American heavy-duty trucks in H2 2024, rising labor costs, and financial implications from Settlement Agreements - Positive trends include strong demand expected for North American medium-duty trucks, Indian truck markets, Power Systems (power generation and mining), and aftermarket businesses[174](index=174&type=chunk) - Demand for trucks in China is expected to remain stable or improve in 2024[174](index=174&type=chunk) - Challenges include expected modest weakening of North American heavy-duty truck demand in H2 2024, continued increases in labor costs and inflationary pressures, and incremental interest expense from debt funding Settlement Agreement penalties[175](index=175&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=46&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Cummins maintains a strong financial condition and liquidity, with $2.2 billion in cash and marketable securities and access to $4.0 billion in credit facilities. The company used $575 million in cash from operations for the six months ended June 30, 2024, primarily due to the $1.9 billion payment for environmental Settlement Agreements. Key uses of cash include dividends, capital expenditures, and debt repayments - Cummins' financial condition and liquidity remain strong, with ready access to credit and capital markets[198](index=198&type=chunk) **Key Working Capital and Balance Sheet Data (In millions):** | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :---------------- | | Working capital | $3,818 | $2,295 | | Current ratio | 1.34 | 1.18 | | Total debt | $7,503 | $6,696 | | Total debt as a percent of total capital | 41.5% | 40.3% | - Net cash used in operating activities was **$575 million** for the six months ended June 30, 2024, compared to **$978 million** provided in the prior year, primarily due to the **$1.9 billion** payment for Settlement Agreements[178](index=178&type=chunk) - As of June 30, 2024, Cummins had **$2.2 billion** in cash and marketable securities and access to **$2.4 billion** under its **$4.0 billion** credit facilities (net of **$1.6 billion** commercial paper outstanding)[121](index=121&type=chunk)[180](index=180&type=chunk) [Key Working Capital and Balance Sheet Data](index=46&type=section&id=Key%20Working%20Capital%20and%20Balance%20Sheet%20Data) Working capital increased significantly to $3.818 billion at June 30, 2024, from $2.295 billion at December 31, 2023, and the current ratio improved to 1.34. Total debt also increased, leading to a higher debt to total capital ratio **Key Working Capital and Balance Sheet Data (In millions):** | Metric | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :---------------- | | Working capital | $3,818 | $2,295 | | Current ratio | 1.34 | 1.18 | | Accounts and notes receivable, net | $5,606 | $5,583 | | Inventories | $5,857 | $5,677 | | Accounts payable (principally trade) | $4,405 | $4,260 | | Total debt | $7,503 | $6,696 | | Total debt as a percent of total capital | 41.5% | 40.3% | - Working capital increased by **$1.523 billion**, and the current ratio improved from **1.18 to 1.34**[176](index=176&type=chunk) - Total debt increased by **$807 million**, raising the debt to total capital ratio from **40.3% to 41.5%**[176](index=176&type=chunk) [Cash Flows](index=47&type=section&id=Cash%20Flows) For the six months ended June 30, 2024, Cummins experienced a net cash outflow from operating activities of $575 million, a significant decrease from the prior year's inflow, primarily due to the $1.9 billion payment for Settlement Agreements. Investing activities used more cash, while financing activities provided a substantial net inflow due to new borrowings **Cash Flow Summary (Six months ended June 30, In millions):** | Activity | 2024 | 2023 | Change | | :------------------------------------------------ | :----- | :----- | :----- | | Net cash (used in) provided by operating activities | $(575) | $978 | $(1,553) | | Net cash used in investing activities | $(806) | $(606) | $(200) | | Net cash provided by (used in) financing activities | $807 | $(603) | $1,410 | | Net decrease in cash and cash equivalents | $(589) | $(299) | $(290) | - Net cash used in operating activities increased by **$1.553 billion**, primarily due to **$1.9 billion** in payments for the Settlement Agreements[178](index=178&type=chunk) - Net cash provided by financing activities increased by **$1.410 billion**, driven by **$1.7 billion** higher proceeds from borrowings (2024 note issuance) and **$743 million** increased net commercial paper borrowings[179](index=179&type=chunk) [Sources of Liquidity](index=47&type=section&id=Sources%20of%20Liquidity) Cummins' liquidity is supported by $2.183 billion in cash and marketable securities (with $1.382 billion held internationally) and $2.419 billion in available revolving credit capacity (after accounting for commercial paper). The company also issued $2.25 billion in senior unsecured notes in February 2024 to enhance liquidity **Sources of Liquidity (June 30, 2024, In millions):** | Source | Total | U.S. | International | | :------------------------------------------ | :---- | :--- | :------------ | | Cash and cash equivalents | $1,590 | $716 | $874 | | Marketable securities | $593 | $85 | $508 | | Total Cash, Cash Equivalents and Marketable Securities | $2,183 | $801 | $1,382 | | Available revolving credit facilities | $2,419 | | | | International and other uncommitted domestic credit facilities | $385 | | | - A significant portion of cash flow is generated outside the U.S., and Cummins manages worldwide cash requirements to avoid local liquidity restrictions[181](index=181&type=chunk) - In February 2024, Cummins issued **$2.25 billion** in senior unsecured notes, receiving net proceeds of **$2.2 billion**, to pay down higher cost debt, finance Settlement Agreement payments, and improve overall liquidity[185](index=185&type=chunk)[180](index=180&type=chunk) [Uses of Cash](index=49&type=section&id=Uses%20of%20Cash) Key uses of cash for Cummins include the $1.9 billion payment for environmental Settlement Agreements in Q2 2024, $469 million in dividend payments, and $409 million in capital expenditures for the first six months of 2024. The company also faces significant debt maturities in 2025 and plans $1.2-$1.3 billion in capital expenditures for 2024 - Cummins made **$1.9 billion** in payments for the Settlement Agreements in Q2 2024[189](index=189&type=chunk) - Dividend payments totaled **$469 million** for the six months ended June 30, 2024. The Board authorized an **8% increase** in the quarterly dividend to **$1.82 per share** in July 2024[190](index=190&type=chunk) - Capital expenditures for the six months ended June 30, 2024, were **$409 million**. The company plans **$1.2 billion to $1.3 billion** in capital expenditures for the full year 2024, with over **65%** in North America[191](index=191&type=chunk) - Significant debt maturities are due in 2025, including commercial paper (**$1.581 billion** outstanding at June 30, 2024) and a term loan/senior notes[192](index=192&type=chunk) [Amplify Cell Technologies LLC Joint Venture](index=50&type=section&id=Amplify%20Cell%20Technologies%20LLC%20Joint%20Venture) Cummins' Accelera business formed Amplify Cell Technologies LLC, a joint venture with Daimler Truck, PACCAR, and EVE Energy, to localize battery cell production in the U.S. Cummins' maximum remaining required contribution to this venture is $780 million, mostly due by 2028 - The Accelera business formed Amplify Cell Technologies LLC, a joint venture with Daimler Truck, PACCAR, and EVE Energy, to accelerate and localize battery cell production in the U.S.[196](index=196&type=chunk) - Cummins' maximum remaining required contribution to the joint venture is **$780 million** as of June 30, 2024, with the majority expected by the end of 2028[196](index=196&type=chunk) [Credit Ratings](index=50&type=section&id=Credit%20Ratings) Cummins maintains stable credit ratings from Standard and Poor's (A/A1) and Moody's Investors Service (A2/P1), reflecting its strong financial condition and access to capital markets **Credit Ratings (As of filing date):** | Credit Rating Agency | Long-Term Senior Debt Rating | Short-Term Debt Rating | Outlook | | :------------------------------------ | :--------------------------- | :--------------------- | :------ | | Standard and Poor's Rating Services | A | A1 | Stable | | Moody's Investors Service, Inc. | A2 | P1 | Stable | - Cummins' credit ratings and outlooks from credit rating agencies remain unchanged as of the filing date[125](index=125&type=chunk) [Management's Assessment of Liquidity](index=50&type=section&id=Management's%20Assessment%20of%20Liquidity) Management assesses Cummins' liquidity as strong, supported by a solid balance sheet, credit ratings, access to capital markets, existing cash, operating cash flow, and revolving credit facilities. These resources are deemed sufficient to fund operating, investing, and financing activities, including capital expenditures, dividends, debt service, pension obligations, stock repurchases, and acquisitions - Management assesses Cummins' financial condition and liquidity as strong, with ready access to credit and capital markets[198](index=198&type=chunk) - Available liquidity sources are believed to be sufficient to fund targeted capital expenditures, dividend payments, debt service, pension obligations, common stock repurchases, and joint venture contributions/acquisitions through 2024 and beyond[198](index=198&type=chunk) [APPLICATION OF CRITICAL ACCOUNTING ESTIMATES](index=50&type=section&id=APPLICATION%20OF%20CRITICAL%20ACCOUNTING%20ESTIMATES) This section reiterates that Cummins' financial statements rely on management's judgments, estimates, and assumptions, particularly for critical accounting estimates like warranty liabilities, fair value of intangible assets, goodwill impairment, income taxes, and pension benefits. No new events or circumstances are expected to materially alter these estimates for the first six months of 2024 - Financial statements require management to make judgments, estimates, and assumptions about uncertainties, which are reviewed based on historical experience and changing business conditions[200](index=200&type=chunk) - Critical accounting estimates include liabilities for warranty programs, fair value of intangible assets, goodwill impairment, accounting for income taxes, and pension benefits[200](index=200&type=chunk) - No reasonably likely events or circumstances are currently known that would result in different policies or estimates being reported for the first six months of 2024[201](index=201&type=chunk) [RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS](index=51&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to Note 17 for details on recently issued accounting pronouncements, specifically FASB ASUs on Segment Reporting and Income Tax Disclosures, neither of which is expected to have a material impact on Cummins' financial statements - Refer to NOTE 17 for information on recently issued accounting pronouncements[202](index=202&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes to the quantitative and qualitative disclosures about market risk since the filing of Cummins' 2023 Form 10-K - There have been no material changes in quantitative and qualitative disclosures about market risk since the filing of the 2023 Form 10-K[202](index=202&type=chunk) [ITEM 4. Controls and Procedures](index=51&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that Cummins' disclosure controls and procedures were effective as of June 30, 2024. There were no material changes in internal control over financial reporting during the quarter - As of June 30, 2024, management, including the CEO and CFO, concluded that Cummins' disclosure controls and procedures were effective[203](index=203&type=chunk) - No material changes occurred in internal control over financial reporting during the quarter ended June 30, 2024[204](index=204&type=chunk) [PART II. OTHER INFORMATION](index=51&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part contains additional information not included in the financial statements, such as legal proceedings, risk factors, equity security sales, and exhibits [ITEM 1. Legal Proceedings](index=51&type=section&id=ITEM%201.%20Legal%20Proceedings) This section incorporates by reference the legal proceedings disclosures from Note 11, 'Commitments and Contingencies,' which detail various lawsuits, claims, and regulatory matters, including the significant Settlement Agreements with U.S. environmental agencies - Legal proceedings information is incorporated by reference from NOTE 11, 'COMMITMENTS AND CONTINGENCIES,' to the Condensed Consolidated Financial Statements[205](index=205&type=chunk) [ITEM 1A. Risk Factors](index=52&type=section&id=ITEM%201A.%20Risk%20Factors) This section highlights that, apart from the specific risk related to the environmental Settlement Agreements, there have been no material changes to the risk factors previously discussed in the 2023 Annual Report on Form 10-K. The Settlement Agreements pose risks of additional claims, costs, and reputational damage - No material changes to risk factors have occurred since the 2023 Form 10-K, except for the specific risk related to the environmental Settlement Agreements[208](index=208&type=chunk) - The Settlement Agreements, finalized in April 2024, carry risks of additional claims, costs, expenses, and reputational damage, including potential further regulatory action and collateral litigation[209](index=209&type=chunk)[210](index=210&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Cummins did not repurchase any common stock during the three months ended June 30, 2024. As of June 30, 2024, $218 million remained available under the 2019 share repurchase program - Cummins did not make any repurchases of common stock during the three months ended June 30, 2024[211](index=211&type=chunk) - As of June 30, 2024, **$218 million** remained available for future purchases under the **$2.0 billion** share repurchase program authorized in 2019[211](index=211&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=53&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reporting period - This item is marked as 'Not applicable'[212](index=212&type=chunk) [ITEM 4. Mine Safety Disclosures](index=53&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period - This item is marked as 'Not applicable'[212](index=212&type=chunk) [ITEM 5. Other Information](index=53&type=section&id=ITEM%205.%20Other%20Information) During the second quarter of 2024, none of Cummins' directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - During the second quarter of 2024, no directors or executive officers adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement'[213](index=213&type=chunk) [ITEM 6. Exhibits](index=53&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including credit agreements, certifications (Sarbanes-Oxley Act), and Inline XBRL documents for financial statements and notes - Exhibits include Second Amended and Restated 364-Day Credit Agreement and Sixth Amended and Restated 364-Day Credit Agreement, both dated June 3, 2024[214](index=214&type=chunk) - Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are filed[214](index=214&type=chunk) - Inline XBRL documents for the condensed consolidated financial statements and notes are included[214](index=214&type=chunk) [SIGNATURES](index=54&type=section&id=SIGNATURES) This section contains the authorized signatures for the Form 10-Q report, including those of the Vice President and Chief Financial Officer (Principal Financial Officer) and the Vice President-Controller (Principal Accounting Officer) of Cummins Inc., dated August 1, 2024 [Signatures](index=54&type=section&id=Signatures) This section contains the authorized signatures for the Form 10-Q report, including those of the Vice President and Chief Financial Officer (Principal Financial Officer) and the Vice President-Controller (Principal Accounting Officer) of Cummins Inc., dated August 1, 2024 - The report is signed by Mark A. Smith, Vice President and Chief Financial Officer (Principal Financial Officer), and Luther E. Peters, Vice President-Controller (Principal Accounting Officer)[216](index=216&type=chunk) - The filing date for the report is August 1, 2024[216](index=216&type=chunk)

Core Insights - Cummins reported $8.8 billion in revenue for Q2 2024, a year-over-year increase of 1.8% and an EPS of $5.26, up from $5.18 a year ago, exceeding Zacks Consensus Estimates for both revenue and EPS [1] Revenue Performance - Net Sales- Eliminations: Reported at -$1.87 billion, slightly better than the average estimate of -$1.88 billion, representing a year-over-year change of -2.4% [3] - Net Sales- Power System: $1.59 billion, exceeding the average estimate of $1.49 billion, with a year-over-year increase of +9.1% [4] - Net Sales- Components: $2.98 billion, slightly above the average estimate of $2.95 billion, but a year-over-year decline of -12.9% [5] - Net Sales- Distribution: $2.83 billion, surpassing the average estimate of $2.68 billion, reflecting a year-over-year increase of +9% [6] - Net Sales- Engine: $3.15 billion, exceeding the average estimate of $2.93 billion, with a year-over-year increase of +5.5% [7] Segment Performance - Net Sales- Accelera: $111 million, below the average estimate of $118.18 million [8] - Net Sales- Engine- Off-highway: $432 million, below the average estimate of $472.43 million, representing a year-over-year decline of -10.7% [9] - Net Sales- Engine- Light-duty Automotive: $461 million, slightly above the average estimate of $449.45 million, with a year-over-year increase of +3.6% [9] - Net Sales- Engine- Medium-duty Truck and Bus: $1.07 billion, exceeding the average estimate of $964.59 million, with a year-over-year increase of +14% [10] - Net Sales- Engine- Heavy-duty Truck: $1.18 billion, above the average estimate of $1.09 billion, with a year-over-year increase of +6% [11] - Net Sales- Power System- Power generation: $987 million, exceeding the average estimate of $935.22 million, with a year-over-year increase of +15.6% [12] - Net Sales- Components- Emission Solutions: $941 million, below the average estimate of $960.52 million, with a year-over-year decline of -2.4% [13] Stock Performance - Cummins shares have returned +7.3% over the past month, outperforming the Zacks S&P 500 composite's +1.1% change, with a current Zacks Rank 3 (Hold) indicating potential performance in line with the broader market [13]

Cummins (CMI) came out with quarterly earnings of $5.26 per share, beating the Zacks Consensus Estimate of $4.85 per share. This compares to earnings of $5.18 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 8.45%. A quarter ago, it was expected that this engine maker would post earnings of $5.11 per share when it actually produced earnings of $5.10, delivering a surprise of -0.20%. Over the last four quarters, the company has ...

EXHIBIT 99 News Release August 1, 2024 Cummins Reports Strong Second Quarter 2024 Results • Record second quarter revenues of $8.8 billion; GAAP Net Income of $726 million • EBITDA in the second quarter was 15.3% of sales; Diluted EPS of $5.26 • Full year revenues are expected to range from down 3% to flat; an improvement from prior guidance of down 2% to 5%. • EBITDA is now expected to be in the range of 15.0% to 15.5%; an increase from previous guidance of 14.5% to 15.5%. 1 COLUMBUS, IND. - Cummins Inc. ( ...

DETROIT, July 24, 2024 (GLOBE NEWSWIRE) -- SDVerse, a marketplace for buyers and sellers of automotive software, on July 24th, 2024, announced that global power technology leader Cummins Inc. has joined the first-ever software marketplace, SDVerse, as Premier Partner. With this partnership, Cummins will gain access to innovative solutions, accelerating development with faster procurement, boosting efficiency, performance, and profitability in commercial mobility. SDVerse is a digital marketplace supporting ...

Group 1: Investment and Expansion - Cummins Inc. will invest an additional $75 million, matching a grant from the Department of Energy, totaling $150 million to enhance production of battery packs and other components for its zero-emissions division, Accelera by Cummins [1][12] - The expansion is expected to create approximately 250 full-time jobs, allowing existing employees to transition into these new roles over time [1] Group 2: Financial Performance and Projections - The Accelera segment has faced increasing R&D and engineering expenses, resulting in operating losses of $223 million in 2021, $334 million in 2022, and $443 million in 2023, with expectations of losses between $400 million and $430 million in 2024 [2] - Accelera is projected to achieve break-even by 2027, supported by its extensive technology portfolio and strong relationships with OEMs and end customers [9] Group 3: Environmental Impact - The Columbus Engine Plant (CEP) will allocate around half of its 1.42 million-square-foot facility to zero-emissions manufacturing, with electric powertrains projected to reduce carbon dioxide emissions by approximately 104 million metric tons by 2030 [7] Group 4: Strategic Vision - Cummins is committed to a zero-emissions future through its Destination Zero strategy, offering diverse solutions including fuel-agnostic engine platforms and fully electric and hydrogen fuel cell solutions [13] - The DOE grant is viewed as a significant milestone in enhancing battery production in the U.S. and reinforcing Cummins' global leadership in electrified solutions for commercial markets [4]

Financial Performance - The company generated revenues of $2,580,514 and net income after taxes of $61,072 in Q2 2024, with overall gross profit margins at 57.5% [2] - Year-to-date cash flow from operations reached $1.5 million, representing a $3.3 million positive swing compared to the same period last year [15] - The company paid out $528,081 in dividends during Q2 2024, slightly up from $522,330 in Q2 2023, maintaining its quarterly dividend payout for the 49th consecutive quarter [15][13] Working Capital and Dividends - The company's working capital for Q2 2024 was $25.2 million, an increase of $0.8 million from Q2 2023 [3] - A quarterly dividend of $0.0125 per common share will be paid on August 13, 2024, representing an annualized yield of 4.2% based on a closing price of $1.19 per share on July 12, 2024 [4] Market Opportunities and Product Development - The company has received a large first order from a new reseller in Brazil, indicating significant market opportunities in South America [5] - The primary R&D focus is on the development and commercialization of the next generation Ka-band Electronically Steered Antenna System (ESA), with initial deliveries for field testing expected by the end of 2024 [6][8] Company Overview - C-COM Satellite Systems Inc. is a leading global designer, developer, and manufacturer of transportable and mobile satellite-based antenna systems, with over 10,000 antenna systems sold in more than 100 countries [7][18] - The company is engaged in the design of a unique multi-orbit antenna aimed at providing low-cost, high-throughput mobility applications over satellite [8]